Health and Wealth: Analysis reveals hosptial perks, quirks and pay

LEWISTON — Peter Chalke no longer earned more than $1 million as head of Central Maine Healthcare. But across town, in his last full year as head of St. Mary's Health System, James Cassidy became the new million-dollar man in 2009.

Some hospitals cut expenses and employee pay as the economy soured. But many presidents and CEOs earned bonuses of more than $100,000. A couple earned much more.

Some hospitals cut salaries and benefits or held them nearly flat as they struggled to deal with the start of skyrocketing charity care and unpaid patient bills. But others spent 25 percent more.

Those are some of the findings in the most recent (2008-09) tax filings by Maine hospitals.

A year after the Sun Journal first took a comprehensive look at executive pay and certain expenditures by nonprofit hospitals in Maine, some things changed and some things stayed the same, like the continuing rise in hospital pay despite a weak economy. And new questions were raised because hospitals were required to disclose more, thanks to changes in tax law.

Other findings for Maine's six largest hospitals, their parent organizations and the smaller hospitals in the tri-county region:

* Two doctors topped the $1 million mark.

* CEO compensation ranged from $256,000 to $1.2 million, with Portland's MaineHealth taking the top spot.

* One hospital hired its own lobbyist.

* Some executives got special perks, such as free travel for spouses. 

* One hospital spent almost $300,000 on a "culture change"consultant.

It's new information highlighting an old issue: how Maine health-care organizations spend patient and taxpayer money.

CEO compensation

Maine has 39 acute care and specialty hospitals ranging in size from the 14-bed C.A. Dean Memorial Hospital in Greenville to the 637-bed Maine Medical Center in Portland. Lewiston's two hospitals, CMMC and St. Mary's Regional Medical Center, are the fourth- and fifth-largest, respectively, according to the Maine Hospital Association.

All of Maine's hospitals receive taxpayer money for giving care to poor and elderly patients. All but one — the New England Rehabilitation Hospital of Portland — are nonprofit. As nonprofits, Maine hospitals get tax breaks and are able to solicit tax-exempt donations. In return, the IRS requires that they pay their CEOs "reasonable compensation" — a vague guide based on the salaries paid by similar nonprofits or for-profit companies. They must also file special federal tax forms detailing their revenues and expenditures and make those forms available to the public.

"Because of their nature as a not-for-profit institution, it's fair game to review these costs and to try to make judgments on what's appropriate and what's not appropriate," said Mitchell Stein, policy director for Consumers for Affordable Health Care, a Maine-based nonprofit advocacy organization.

For the second year, the Sun Journal reviewed the most recent tax forms for the state's six largest hospitals and their parent organizations, as well as the three smaller hospitals and their parent organizations in Franklin and Oxford counties. We looked at CEO salaries, travel/conference expenses and wages for the highest-paid employees, as well as other expenditures.

In last year's look at what were then the most recent numbers (2007-08), some of the most unusual financial moves were made by CMMC and its parent organization, Central Maine Healthcare. This year, no single hospital stood out. Several did, depending on whether the focus was CEO compensation, executive bonuses or uncommon expenditures.

This year, for overall CEO compensation, CMMC and Central Maine Healthcare were still distinct — not because they topped the list, but because they dropped a few spots on it.

Chalke, who earned $2 million in fiscal year 2006-07 and $1.2 million in fiscal year 2007-08, dipped to $738,000 in calendar year 2008. Laird Covey, head of CMMC, earned $656,000 in 2007-08. He fell to $405,000 in 2008.

A representative for the hospital group said there were two reasons for the drop. First, the hospital group had spent the past couple of years beefing up Chalke's deferred compensation, or retirement account, to make up for a past lack of contributions. With that shortfall made up, Chalke's deferred compensation fell by hundreds of thousands of dollars in 2008. Second, the executives' compensation packages were tied to hospital performance, and performance was down.  

"They didn't accomplish as much," said Rian Yaffe, CEO of Yaffe & Company, the consulting firm hired by Central Maine Healthcare's board to advise it on executive compensation. "Actually, in the clinical things, they did well. They didn't have the financial accomplishment."

Once the highest-paid hospital CEO in Maine, Chalke fell to fourth on the list, trumped by the leaders of Maine Medical Center in Portland and that hospital's parent organization, MaineHealth, both typically high on the list of CEO compensation.

Chalke was also trumped by the hospital CEO down the street.

St. Mary's Health System nearly doubled the compensation of its leader, Cassidy, to $1 million. Traditionally middle of the pack, Cassidy shot up to second-highest-paid hospital CEO in the state.

The reason? Like Chalke the year before, Cassidy saw a significant increase in his retirement pay.

While Cassidy's base salary was $371,000, the hospital group paid $466,000 into his supplemental executive retirement plan, a pension-like program. St. Mary's chief financial officer said the plan required more money as Cassidy neared retirement. He retired the following year.

Another factor in Cassidy's high compensation? His $109,000 bonus.

Bonus pay

Last year, little information was available about a CEO's compensation package. This year, for the first time, all nonprofit hospitals were required to break down in detail the compensation of their CEOs, their "key employees" and their highest-paid employees. Including bonuses.

Doctors tended to receive bonuses that ranged from a few thousand dollars to a few hundred thousand. Typically, those bonuses depended on how many patients the doctor saw and whether he or she met certain goals, including clinical ones.

CEO bonuses also ranged.

William Caron Jr., CEO of MaineHealth, the Portland-based parent organization of Maine Medical Center and several other hospitals, was the highest paid CEO in the state. He also earned the largest bonus at $306,000.

MaineHealth's philosophy: Pay executives a base salary — $657,000 for Caron —  and give more as an incentive to meet goals, like greater patient satisfaction, the completion of projects and increased hospital income.

"I tell this to people on the board, this is not a perfect science. It's part art, part science. The MaineHealth board of trustees is comprised of all independent community members and we've got to apply some of our own logic and philosophies to how we choose to set compensation. At the same time we've got to remember 'attract, motivate and retain,'" said Sara Burns, chairwoman for MaineHealth's board, which, like most hospital boards, sets its CEO's compensation.

At nearly $250,000, Maine Medical Center's leader, Richard Petersen, received the second highest bonus. A handful of others made over $100,000, including Chalke at Central Maine Healthcare, even though Yaffe said the hospital group didn't perform as well financially that year. Eileen Skinner, head of Mercy Hospital and Mercy Health System in Portland, also earned over $100,000 in bonus money, as did Mary Michelle Hood at Eastern Maine Healthcare Systems in Brewer, the parent organization of Eastern Maine Medical Center in Bangor.

So did Cassidy at St. Mary's Health System.

"It's probably related to the financial results of '08 versus the financial results of '07. . . . I'm not party to that conversation. But I do think we had a pretty successful 2008 year, financially and goals-wise, said Carolyn Kasabian, the chief financial officer.

In 2009 — the year Cassidy received his $109,000 bonus for doing so well in 2008 — the health system, like many in Maine, found itself facing financial problems. As the economy worsened, patients failed to pay their bills and charity care requests began to rise. In an effort to save money, St. Mary's froze its employee retirement plan, slowed hiring and, in the last part of the year, cut the wages of senior leaders by 11 percent — including Cassidy — middle management by 6 percent and frontline supervisors by 3 percent.

Some hospital board members consider such additional pay a necessity to ensure their leaders will work to meet goals. However, Yaffe, who works with many hospital boards in Maine, bristles at calling it a "bonus," which is the term used on the federal tax forms. He prefers "variable pay."

"I don't believe a hospital executive should be getting a bonus for doing a good job. I mean, why should he be getting a bonus and the nurse doesn't get a bonus? If your executive team needs an incentive, you've got the wrong team. They should be motivated and caring to do what they need to do," he said. "What the board is after is . . . a strategic plan. They have a direction which the institution is going. They want a significant part of the pay to the executives to be geared to whether that plan is being accomplished or not. If it's being accomplished, then they can earn some of it. They rarely earn all of it, but they can earn some of it.  If it's not being accomplished then they can earn little or none of it."

Other hospital boards don't like the idea of additional pay, whether it's called bonus, incentive, variable pay or something else. Of the hospitals and parent organizations surveyed, three gave no bonuses in 2008-09. 

MaineGeneral Health and its Augusta/Waterville hospital, MaineGeneral Medical Center — the third largest hospital in the state — were among them. MaineGeneral Health's CEO, Scott Bullock, earned $538,000 with no bonus. The head of MaineGeneral Medical Center, Charles Hays, earned $256,000 with no bonus.

"I just don't think it's ever been part of our history," said Bob Marden, board chairman. "If you come from that place, it's not something you have to either take back or deal with that expectation."

Marden believes MaineGeneral Health's CEO feels fairly compensated.

"He has been with us almost 20 years. This is probably where he will retire, but I'm probably speaking out of school a bit. I'll just tell you that he's probably not looking elsewhere to run a facility. He has his challenges here," Marden said, adding, "He's satisfied with how he's treated. For that we're happy. I'm not sure everyone else would feel that way and our challenge in the future may be very much different when we come to look for somebody (to replace him). But this is where we happen to be right now. "

Franklin Community Health Network was another with a no-executive-bonus policy. Rebecca Ryder learned that when she was hired to replace Richard Batt as CEO of the Farmington-based group and its Franklin Memorial Hospital in 2008-09. Batt was making about $320,000, nearly all of that in base pay. Though he retired that year, he was given no large retirement contribution — and had not received one since at least 2006, the earliest year such information is readily available. He received no bonus pay over those years.

"This organization for a long time has had a philosophy. We believe our salaries should be in the middle of the pack when it comes to the state of Maine. Not the highest. Not the lowest," Ryder said. "We want to hire good people. You have to fairly compensate people. So to know that the board used that same philosophy for the CEO position actually made me feel pretty good."

Ryder has worked both in organizations that offered bonuses and organizations that didn't. She doesn't think either method is good or bad. Just different.

"It really depends on your philosophy. And I know the word 'bonus' just has such negative connotations these days. But, you know, withholding compensation and setting goals and having people meet those goals, is not a bad concept," she said. "It's just not a philosophy this organization has had."

It also wasn't a philosophy she was necessarily looking for.

"I wasn't going after a position for the compensation," she said.

Salary spending overall

Just as compensation and bonuses varied hospital to hospital as the economy soured, overall spending on employee benefits and salaries also varied, according to the tax filings.

St. Mary's Health System and its hospital stayed virtually flat on spending one year to the next. Ten others went up between 6.5 percent and 14.5 percent, a difference of between $130,000 and tens of millions of dollars, depending on the size of the organization.

Dollar-wise, the standouts were Eastern Maine Medical Center, which jumped more than $34 million, and Maine Medical, which jumped $46 million.

EMMC officials said the hospital hired 34 specialty and primary care doctors that year, moving them from private practice to the hospital's employ. They said that accounted for much of the hospital's increase.

Maine Medical Center officials said a change in reporting requirements was responsible for part of their increase. This year the hospital was required to include payroll taxes and last year it wasn't, they said. That change added $20 million to its total. They said about another $11 million of the increase was due to higher health insurance, pension plan and other benefit costs. About another $14 million was due to pay raises for staff. And the rest was due to the addition of 200 positions.

Percentage-wise, the standouts were MaineHealth, which saw its salaries and benefits increase 26 percent, and Central Maine Healthcare, which jumped 28 percent.

MaineHealth failed to return calls and e-mails seeking comment on its 26 percent jump. 

Central Maine Healthcare, which is the administrative umbrella for the three hospitals under it, said its 28 percent jump — $2.8 million — was largely due to a 2 percent pay increase for its 134 employees and the hiring of 29 information technology workers so it could stop outsourcing that IT work. The shift from outsourcing to in-house work ultimately saved the hospital group just over $190,000, officials said, even with the increase in salaries and benefits.

Only two hospital groups saw a drop in salaries and benefits: MaineGeneral Health, the parent organization of MaineGeneral Medical Center in Augusta and Waterville, and Western Maine Health Care, the parent organization of Stephens Memorial Hospital in Norway.

MaineGeneral Health's spending on salaries and benefits dropped 10 percent, or just over $1 million. Officials said the hospital group had fewer people. 

Western Maine Health Care dropped 17 percent, or about $184,000. Officials said a department manager left during the year and that position was not filled. And Healthy Oxford Hills, a Healthy Maine Partnership program for which Western Maine Health Care is a lead agency, lost grant funding and cut staff members' hours.

While salaries and benefits were, not surprisingly, among the biggest expenditures by all Maine hospitals, some hospitals spent money in ways that few others did.

Consultant, CEO perks

All Maine hospitals belong to the Maine Hospital Association, a group that often lobbies state lawmakers on their behalf. A portion of  hospitals' association dues are often noted on tax forms as lobbying expenses.

But Eastern Maine Healthcare also spent $29,000 to hire its own Augusta lobbyist and to send employees to the state capitol to meet with Maine officials. According to its tax forms, the hospital group met with the Department of Health and Human Services commissioner to discuss home care reimbursement. It was also involved with 16 pieces of legislation, including an act to authorize a general fund bond issue for capital projects for hospitals and an act to improve transparency at certain hospitals. Both bills died in committee.

"There are some issues that are particularly unique to Eastern Maine Health Systems or our hospitals, and we feel that we need to be at certain discussions or hearings, providing testimony on certain bills and whatnot that are going to impact our organization," said Dan Coffey, chief financial officer for the system. "One big issue that was going on, not just for us but for all Maine hospitals, was dealing with the underpayments, the MaineCare underpayments from the state of Maine. EMHS, our seven hospitals, represent a disproportionately high share of the total MaineCare shortfall. So I know that's one issue we felt needed to be at the table because it impacted us to a much greater extent than it impacted a lot of other hospitals around the state."

In another unusual move, Eastern Maine Healthcare cut spending on employee events from $100,000 to $60,000 — then spent $295,000 on a Florida-based "culture change" consultant to, in part, boost morale.

"(StuderGroup) provides advice, consulting and support for really developing the culture of the organization, working with employees and managers to help, you know, put processes in place so that employees are accountable and managers are paying attention to what we need to do to provide better care, faster, less expensive," Coffey said. "It's very important, I think, to provide good patient care, and if you have happy employees and. . . everyone is equally focused on the mission and vision of the organization, that tends to result in better patient care."

With Studer's help, officials said, Eastern Maine Healthcare created "pillars of excellence," a pithy, five-part goals document. Officials said Studer also helped the hospital group create a list of must-haves to improve service and quality, work on accountability and provide leadership development and expert coaching to employees.

Studer's work with the hospital group is ongoing and long-term. But while officials believe Studer has helped overall — "Any organization we have come in here and do surveys provides very high marks for our hospitals," Coffey said — it may not have helped enough. Last November, more than a year after Studer started working with Eastern Maine, EMMC nurses went on strike during contract negotiations. Demanding that baseline staffing levels be included in their contract, they said the hospital understaffed nurses, putting patients at risk and contributing to their job dissatisfaction. They are still without a contract.

Other hospital groups spent money not on consultants but on uncommon executive perks.

Mercy Health System of Maine, the parent of Mercy Hospital in Portland, gave seven executives a discretionary spending account worth $15,000 each to pay for "the functioning and development of the executive role," including approved professional dues, professional meetings, fitness center memberships and home computer connections so they can work from home. Those expenses were also "grossed-up" or increased to cover the income taxes the executive would incur. About 60 percent of Mercy's executives used the maximum amount allowed, officials said. The rest used somewhere between $5,000 and $12,000 each.

Although Mercy's CEO Eileen Skinner called them "fairly typical kinds of accounts," no other hospital noted their use. 

"They’re really well-defined criteria. Frankly they’re defined at the Catholic Health East level (Mercy Health System's parent organization) so that it’s not inappropriate expenses. I personally review every single one of them," Skinner said. "It’s another compensation source, but it’s fairly small.”

A couple of hospitals paid for the travel of spouses when board members, CEOs, executives or other key employees traveled on official business. At St. Mary's Regional Medical Center and its parent organization, those payments were treated as taxable compensation and reported on the employee's W-2.

Maine Medical Center also paid for travel, but its tax filing does not say such payments were treated as taxable compensation. While the hospital's vice president of finance said the travel was for board member spouses to accompany the board member to an educational conference, the hospital said in its IRS tax filing that companions flew with officers to attend meetings with donors on the hospital's behalf.

It is unclear where those meetings were held, but Maine Medical is licensed to raise funds in Florida. As part of those fundraisers, Maine Medical conducts annual educational seminars on various topics with potential donors.  

Maine Medical and its parent organization, MaineHealth, also offered another unusual perk: social club membership.

The memberships allowed MaineHealth leaders to hold business meetings one-on-one over lunch or with several people in a function room at the exclusive Cumberland Club in downtown Portland or the upscale Portland Country Club in Falmouth. Maine Medical leaders used the Cumberland Club or The Woodlands Club in Falmouth. Memberships were put in the CEO's name.

That perk has since been eliminated.

"We weren't comfortable any longer having social memberships," said Burns, chairwoman of the MaineHealth board.

It wasn't, she said, a matter of price — Burns didn't know how much the memberships cost the hospital group — it was a matter of philosophy.

"I think it's just a basic responsibility of your compensation committee every year to look at every benefit and review them," she said. "Part of the review last year was looking at those benefits and saying that the committee did not feel comfortable that they were expenses that we wanted to incur. Period."

The Legislature

Although the IRS requires nonprofit hospitals to report every year on income, expenditures and CEO compensation — with the new forms requiring more details — some in Maine don't think that's enough.

For the second year, Rep. Adam Goode, D-Bangor, has submitted a bill that would make hospitals that receive $250,000 a year in public subsidies subject to right-to-know laws, making their board meetings — along with discussions of capital projects and spending — public.

"I think it makes sense that concerned citizens should be able to attend board meetings," he said.

That bill, which has eight co-sponsors, including two Republicans, was opposed this past week by the Maine Hospital Association and supported by the Maine People's Alliance and the Maine Nurses Association, Goode said.  The Health and Human Services Committee killed the bill Friday.

Goode has also submitted a bill that would prohibit hospitals and other large medical facilities from paying their highest-paid employee more than 10 times what they pay their lowest-paid employee. That bill is in the Labor Committee; no work session has been scheduled for it.

Rep. Brian Bolduc, D-Auburn, also submitted a bill with an eye toward health care executive salaries. His would have tied compensation packages of hospital CEOs to the compensation of the Maine governor, capping it now at about $70,000 a year. That bill died in committee.

Stein, the policy director at Consumers for Affordable Health Care, said his group remains concerned about the rising cost of health care — and how that's affected by executives compensation and hospital expenditures. Hospital spending matters in health care, he said.

"Everything factors in to the eventual bill that patients pay. The cost of the service is obviously a lot more than just the doctor's time or the nurse's time," Stein said. "Eventually, everything gets billed. Everything in the hospital has to be paid for and it is paid for by the patient."

ltice@sunjournal.com

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Comments

KATHRYN PENDLETON's picture

Tron, In my experience, it

Tron, In my experience, it has always seemed to me that non profit executive postions were mostly Democrats. Not that my question was directed towards politics.

KATHRYN PENDLETON's picture

What do these people DO with

What do these people DO with all this money?

 's picture

they buy republican

they buy republican politicians so they don't have to pay taxes on their income.

Doreen Sheive's picture

Unfair practices

It is extremely unfair to treat one group of employees (the CEO, etc.) better than one pays the other employees. This has always been a huge problem with non-profits. They get tax exemptions and spend money like it is growing on trees. I really think there needs to be a thorough review of non-profit status. I think it is a misused category which has been ignored for far too long.

One other comment, Scott Bullock at MaineGeneral Medical Center shouldn't even be earning over half a million dollars. His hospital has not been able to qualify as one of the hospitals recommended to receive 100% reimbursement from the Maine State Employees Health program for years. There are simple requirements to meet this standard, but his hospital can't seem to do so. They are now going to build a new hospital which will solve all the problems -- NOT. It reminds me of the philsophy of the educations system -- it one builds a new school, it takes care of all the problems. Well, it doesn't as we well know.

LePage wants to spend more money on education -- this has not helped in past years. We keep throwing money at education with the results getting worse and worse. The state has not been able to meet the 55% contribution to education because the locals keep increasing the budgets too much. No one seems to pay attention to this fact.

So, we have two areas that need thorough reviews -- non-profits and education.

Steve  Dosh's picture

Health & Wealth II

LSJ ® ,
Nice investigative journalism ? 
Steve Jobs Still Makes A $1 Salary
By Michelle Castillo on January 12, 2011
Read more: http://techland.time.com/2011/01/12/steve-jobs-still-makes-a-1-salary/#
Aloha from Pahoa /s, Dr. Dosh and ohana

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